PNC Bank settled a $9.5 million False Claims Act yesterday for failure to prudently underwrite and close SBA 7(a) loans.

PNC approved 74 PLP SBA-guaranteed loans that were brokered by Jade Capital and its principal, Joon Park . Beginning in 2006, a number of Jade Capital loans went into default.

PNC submitted purchase-demand guaranty claims to SBA for payment for many of the defaulted loans. The SBA approved payment for 24 loans.

The Feds claim this created a false act of requesting money from the federal government by PNC as PNC knew the loans were ineligible for SBA financing, thus creating an invalid PLP guaranty.
Joon Park and five others pled guilty to bank fraud that resulted in loan losses of over $100 million.

They said they created and submitted false and fraudulent documents to secure PNC’s loan approval. For example, the crooked loan brokers used computer software programs to alter bank statements, and created false management resumes, profit/loss figures, and gift letters.

Joon Park received 15 years in prison.

The Fed’s civil claims accused PNC for failing to adhere to requirements as a PLP lender, including demanding adequate bank and IRS tax records from the borrowers, ensuring that the borrowers had the ability to repay the loans, and failing to apply prudent lending standards.

Additionally, PNC should have known that SBA requirements to recover on the guarantees were not met.

“Banks that are trusted to make loans backed by the SBA have a duty to apply proper lending standards, because the United States is obligated to pay when federally-backed loans default,” says U.S. Attorney Rod J. Rosenstein. “The government will vigorously pursue lenders that fail to enforce reasonable lending standards and stick the taxpayers with the bill for bad loans.”

“This case is the latest example of the significant, positive results achieved through the combined efforts of the SBA and the Department of Justice to uncover, and forcefully address, civil fraud committed in connection with SBA’s lending programs,” says SBA General Counsel, Melvin F. Williams, Jr. “Rooting out, and vigorously pursuing, instances of civil fraud committed by those who participate in the lending programs of SBA is among the highest priorities of this Agency.”

“The SBA Office of Inspector General will aggressively investigate wrongdoing in SBA programs,” says Inspector General Peggy E. Gustafson. “SBA’s loan programs are designed to provide eligible small businesses access to capital to finance and grow their businesses, and SBA’s preferred lenders have a responsibility to apply prudent lending standards in making these loans.”
PNC settled the False Acts Claim for $9.5 million without admitting wrongdoing.

Fred Solomon, a PNC spokesman, said the bank denies the allegations and was a victim of fraud. The bank settled to avoid further costs of litigation, he said.

“The Jade principals carried out a fraud they successfully concealed from SBA and other lenders for years,” Solomon says.

4 years ago by Coleman Report in . You can follow any responses to this entry through the | RSS feed. You can leave a response, or trackback from your own site.